Chapter 4 Promissory note and cheques

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Chapter 4 Promissory noteand cheques

• 4.1 Promissory note
• 4.1.1 Definition of a promissory note
• 4.1.2 Parties of promissory note
• 4.1.3 Contents of a promissory note
• 4.1.4 Classification of promissory note
• 3.4 Liabilities of the Parties
• 3.5 The difference between a bill and a note

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4.1.1 Definition of a promissory note

• UK Bills of Exchange Act of 1882, Article 83
• A promissory note is an unconditional
  promise in writing made by one person to another,
  signed by the maker, engaging to pay on demand or
  at a fixed or determinable future time a sum
  certain in money to or to the order of a
  specified person or to bearer.
• ???????????????????????

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4.1.2 the Parties

• (1) Maker
• the principal debtor.
• Engaging to pay the promissory note within the
  tenor.
• (2 ) Payee
• Note A promissory note can be endorsed in the
  same way as a bill of exchange or check.
• The endorser is liable to pay the promissory note
  or compensate the holder for non-payment provided
  that the necessary proceedings in dishonor have
  been taken.

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4.1.3 Contents of a promissory note

• 1.The word promissory note
• 2.An unconditional promise to pay
• 3.Payee or his order
• 4.Signature of the maker
• 5.Place and date of issue
• 6.Period of payment
• 7.A sum certain in money
• 8.Place of payment
• (6)???????,???????,??????????2???

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Case

• Pay to the order of the Bank China the sum of
  thirty-five thousand US dollars. is a valid
  Promissory note
• Pay to the order of the Bank China the sum of
  thirty-five thousand US dollars when the ship
  Dongfeng reaches the port of New York.
• We would be delighted if you would pay to the
  order of the Bank China the sum of thirty-five
  thousand US dollars.
• Are not valid promissory note.

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?2-1??????????????????????????A????????B,????
?B????????????
PROMISSORY NOTE FOR USD10,000.00 JULY 13, 2006 NEW YORK AT THIRTY DAYS AFTER SHIPMENT DATE (SHIPMENT DATE JUL 10, 2006) WE PROMISE TO PAY B CO. OR ORDER THE SUM OF USD TEN THOUSAND ONLY FOR VALUE RECEIVED. FOR A COMPANY, NEW YORK (SIGNED)
B????????C?????C??????,C??????????D?????D????
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4.1.4 Classification of Promissory Note

• According to the tenor
• Sight /Term promissory note
• According to the maker
• commercial /bankers promissory note
• International Money Order
• (??????) ???USD2500.00
• Treasury Bill (???)P183
• Travelers cheque (????)

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4.1.4 Differences between a bill and a note
Bills of exchange Promissory notes
An order to pay. A promise to pay.
A three-party instrument. A two-party instrument.
Where payable after date, a bill is generally accepted. Never accepted.
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Bills of exchange Promissory notes
?Can be accepted for honor. ?Never accepted.
?Can be drawn in a set. ?One copy.
?Foreign bills need protesting on dishonor to retain the liability of prior parties. ?Protest is never needed.
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4.2 Check

• 4.2.1 Definition of a Check
• 4.2.2 Contents of a Check
• 4.2.3 Parties to a check
• 4.2.4 Classification of Check
• 4.2.5 The process of check clearing
• 4.2.6 Dishonor of Checks
• 4.2.7 Difference between a Check and a Bill of
  Exchange

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4.2.1 Definition of a check

• ??????,???????????????????????????????????
  ??????????
• A check is a bill of exchange drawn on a
  bank payable on demand
• A check is an unconditional order in
  writing, signed by the person giving it,
  requiring the bank to whom it is addressed to pay
  on demand a sum certain in money to, or to the
  order of , a specified person or to bearer.

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• Check for USD16000.0
• New York, May 1,2007
• Pay to the order of John Smith the sum of sixteen
  thousand US Dollars only.
• To Bank of China,
• Beijing China
• For China
  National Art Craft
  
  
  
  
  
  
  
  
  
  
  
  Import Export Corp.
• 
  Signature

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4.2.2 Contents of a Check

• (1) The word check
• (2) Unconditional
• (3) The name and address of the paying bank
• (4) Drawers Signature
• (5) Place and date of issue.
• (6) The word "at sight".
• (7) A certain sum of money.
• (8) Payee or his order.

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4.2.3 Parties to a check

• (1) The drawer.
• The person who makes out the check and keeps
  an account current in the paying bank.
• (2) The drawee.
• The banker on whom the check is drawn and to
  whom the order to pay is given. He is the banker
  with which the drawer maintains an account.
• (3) The collecting bank.
• The payees bank which collects/obtains
  payment for its customer from the paying bankthe
  drawers bank.
• (4) The paying bank where the drawer has an
  account
• (5) The payee

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4.2.4 Classification of Check

• 1. Uncrossed Check
• 2. Crossed Check
• 3. Certified check

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• Uncrossed check Crossed check
• a crossing is in effect an instruction by the
  drawer or holder to the paying bank to pay the
  fund to bank only instead of over the counter of
  the paying bank

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• Certified checks (????)
• A check is certified by the drawee bank. Once a
  check is certified by the drawee bank, all other
  obligors on the check will be discharged of the
  liability of the payment.

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2.4.5 The process Check Clearing

• --The payee should deposit the check into his
  bank before he can obtain payments expressed in
  the check. This process from depositing a check
  to obtaining payments is known as check clearing.
  
• Collecting bank
• Paying bank
• Process of Check Clearing

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Process of Check Clearing
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4.2.6 Dishonor of Checks

• When there is not enough money deposited in the
  drawers account.
• When the check does no bear a date or is
  post-dated or out of date.
• When the signatures on the check is not in strict
  conformity with which kept in paying bank.
• When check is mutilated and torn.

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4.2.6 Difference between a bill and a check
Cheques Bills of exchange
The drawer is the customer of the drawee bank. No specific requirement, i.e. , the drawer can be a trader or a bank.
The drawee must be the bank with which the drawer opens a checking account. No specific requirement, i.e. , the drawee can be a trader or a bank.
A payment can be certified. Both a payment instrument and a credit instrument.
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Cheques Bills of exchange
in the case of a certified cheque, the bank that has certified the cheque becomes the principal obligor and all other parties are discharged of liability. In the case of a sight bill, or a usance bill before acceptance, the drawer is the principal obligor in the case of an accepted bill, the acceptor is the principal obligor.
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Cheques Bills of exchange
A cheque can be certified. A bill can be accepted, guaranteed or accepted for honour.
A cheque can be cancelled before payment. After acceptance, the payment is irrevocable.
A cheque is payable on demand. A bill is payable on demand or at a determinable future time.
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CASE

• John Black steals Wolf Smiths cheque book,
  forges Mr. Smiths signature to a cheque
  USD5000.00 and present it to the bank on which it
  is drawn and obtained payment.
• Question Can the bank debit Mr. Smith account ?

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